The MCS-90 is a required endorsement to a business automobile policy for hazardous material/waste transporters. It originated in response to the Motor Carrier Act of 1980. Its purpose is to ensure that funds are available for damages arising from a trucking accident that involves hazardous materials. Unfortunately, one of the most common problems encountered during the handling of business auto losses lies in an insured's belief that it is afforded coverage pursuant to the MCS-90 endorsement to the business auto policy. It is a misconception that can have severe financial implications and one that is critical for fleet operators to understand.

It is crucial to understand that the MCS-90 endorsement is not designed to provide pollution coverage for an insured. Rather, the MCS-90 exists to protect members of the public who suffer injury or property damage as a consequence of the operation, maintenance or use of a motor vehicle. The MCS-90 is a required endorsement on all policies of insurance for carriers who transport property in interstate commerce, including, but not limited to, hazardous materials, pursuant to the Motor Carrier Act of 1980 and the rules and regulations of both the Federal Highway Administration and the Interstate Commerce Commission. The rationale behind the requirement is to ensure that a fund is available to respond to third-party claims notwithstanding the terms and conditions in the remainder of the insurance policy.

The language under which the MCS-90 provides protection for third-parties is as follows:

[T]he insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles . . . regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere . . . It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured.

Public liability is defined as "liability for bodily injury, property damage and environmental restoration."

In reviewing the above language, one can see that the MCS-90 requires the insurance carrier to pay any final judgment recovered against an insured with regard to public liability. If one reads on, however, it becomes apparent that the endorsement is not as beneficial to the insured as may initially have seemed the case. The key lies in the following provision of the MCS-90:

However, all terms, conditions and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.

In other words, the MCS-90 allows the insurance carrier to enforce the terms and conditions of the insurance policy, by allowing it to seek reimbursement of any payment to third parties from an insured. This is important where a pollution incident occurs, since most business auto and truckers policies specifically exclude coverage for pollution-related claims*. The consequence for an insured is that where coverage is based solely upon the MCS-90, the insured will likely be responsible for the loss and possibly risk financial devastation.

All transporters, particularly those who transport hazardous materials, must realize that the MCS-90 does not, and is not designed to, afford protection for the insured. Consequently, it is essential that the terms and conditions of the policy itself be carefully examined prior to purchase to assure that the insured's expectations regarding coverage are met. Consequently, make sure your company asks the right questions about the policy. There are policies on the market which offer true pollution coverage for transporters. Only armed with the correct understanding of how the MCS-90 works can an insured be a well-informed purchaser of business auto coverage.

* Refer to your policy for actual terms and conditions.